On July 16, Chinese lab Moonshot AI unveiled the Kimi K3 model, containing 2.8 trillion parameters. This launch triggered a massive sell-off in the global semiconductor market, affecting both Asian and American exchanges.
On Friday, shares of chipmakers and AI-related companies plummeted sharply. The steepest declines were recorded in Asia: Taiwan's TWII index lost over 6%, while Japan's Nikkei 225 closed down 4%. In the US, the Nasdaq fell 1.5%, marking its worst performance of the week. Shares of Chinese developer Z.ai in Hong Kong crashed nearly 30%. Nvidia temporarily ceded its status as the world's most valuable company to Apple.
Is the "DeepSeek Effect" Returning?
Investors are drawing direct parallels to January 2025, when the launch of DeepSeek's R1 model wiped out approximately $590 billion from Nvidia's market cap in a single session. Kimi K3 became the largest open model at launch: in the Artificial Analysis Intelligence Index, it scored 57 points, surpassing Claude Opus 4.8 and GPT-5.5, and nearly catching up with Claude Fable 5 and GPT-5.6 Sol. Its key advantage is performance on par with top-tier solutions at a fraction of the cost. The model supports a context of 1 million tokens and handles both text and images.
The full weights of Kimi K3 will be available on July 27 under a Modified MIT license, allowing smaller labs to use it for free. This radically shifts market dynamics: a cheap and powerful open model could democratize access to cutting-edge AI technologies.
Wall Street Analysts: Panic or Pattern?
The market reaction was no surprise to professionals. Morgan Stanley called K3 the result of steady progress, not a shock. Analyst Gary Yu notes that Chinese large language models (LLMs) are comprehensively catching up to American leaders in size, performance, and price. At Bernstein, the release was described as "confirming": AI is advancing rapidly, and China is confidently keeping pace, continuing to gain market share.
However, some experts consider the sell-off excessive. According to their data, the cost of using Kimi K3 is close to GPT-5.6, not radically lower, so the panic may be unjustified.
Cryptocurrencies Under Pressure
The wave of decline also hit digital assets. Bitcoin fell below $64,000, reflecting overall pessimism in financial markets.
Moonshot AI is backed by Alibaba, which invested $1 billion in the startup in 2024 at a valuation of $2.5 billion. The project is now valued at approximately $31.5 billion.
A broader sell-off in the chipmaker market has been ongoing for several weeks amid concerns about inflated valuations of AI infrastructure-related companies. The Philadelphia Semiconductor industry index is more than 20% below its late-June record, formally indicating a "bear market." The release of Kimi K3 only accelerated the decline, acting as a trigger for profit-taking.
Expert opinion: The launch of Kimi K3 is not a random shock but a natural stage in the battle for AI leadership. China is proving it can create competitive models at significantly lower costs. The market is reassessing risks, but the long-term trend toward cheaper and more open AI technologies will only intensify. Investors should prepare for a new reality where Chinese startups become full-fledged players, not just followers.